How Vulnerable Are Pharma Stocks to Fiscal Austerity?

At first blush, Washington’s tough talk about fiscal austerity doesn’t look good for drug makers. Government programs including Medicare and Medicaid spend $99 billion each year on prescription medicines, according to Washington consulting firm Avalere Health, making for a ripe cost-cutting target.

Not surprisingly, drug stocks have dropped with the rest of the market recently. As the WSJ reports, pharma companies have ramped up their lobbying, warning that cuts to the drug prices paid by Medicare’s drug benefit, for example, could mean loss of some of the industry’s 675,000 jobs and investment in new lifesaving treatments …